The Liquid Federation is a group of cryptocurrency businesses, including exchanges, trading desks, infrastructure companies, game developers, and more. The federation fulfills a number of tasks that are integral to the Liquid Network’s operation.
A subset of the Liquid Federation (currently 15 members) operates Liquid functionaries. Liquid functionaries are specialized servers that sit at the center of the network.
Functionaries perform two roles:
- Take turns proposing and signing new blocks on the Liquid sidechain.
- Manage the two-way Bitcoin peg and secure the bitcoin held on the network in the federation’s multisig wallet.
Note: Currently, the number of functionaries cannot exceed 15 due to technical limitations. Upon the launch of the in-development Dynamic Federations (DynaFed) update, the network will support the addition of many more functionaries beyond the initial 15.
The Liquid Federation members propose and vote for the representatives on the federation’s boards that lead decision-making processes related to the network’s operation.
- The technology board oversees the prioritization of new features and develops a technical roadmap for the network.
- The membership board provides criteria for the onboarding and removal of federation members.
- The oversight board recommends internal rules for the federation’s protocols and policies and oversees the network’s status.
Every federation member can be added to the Peg-Out Authorization Key (PAK) list. Once added to the PAK list, the Bitcoin addresses of members are whitelisted, enabling them to perform peg-outs. Liquid users can convert L-BTC to BTC through the federation members’ peg-out services.
Liquid Network Access for Users
Federation members facilitate the access to the network for Liquid users. Members can operate bridge nodes that act as a link between Liquid nodes run by users and the Liquid functionaries.
What Are the Benefits of Being a Liquid Federation Member?
Federation members enjoy a number of privileges on the Liquid Network. These may serve as additional economic and strategic incentives for cryptocurrency companies that are already interested in joining the Liquid Federation.
Contribution to the Network's Security
The security of the network is in the best interest of its participants. By joining the federation, members can actively contribute to Liquid’s geographical and geopolitical distribution, and thereby to its resilience.
Contribution to the Network's Governance
All federation members have voting rights in the board election process and can nominate representatives of their own companies for board seats, allowing every federation member a fair chance for a seat at the table.
Reliable Connection to the Network
Members can maximize the reliability of their connection to the Liquid Network by running bridge nodes that directly connect to functionaries via Tor.
Federation members can perform L-BTC peg-outs themselves, allowing for a high level of convenience and independence. Members may also opt to provide peg-out services for their users, providing additional revenue opportunities.